• Reuters


Firms cut spending on plant and equipment by the most in a decade in the second quarter, the government said Tuesday, as the coronavirus pandemic delivered a heavy blow to business activity.

The negative reading comes after the government called a state of emergency early in the second quarter in a bid to tackle the health crisis, which also led to sharp falls in corporate profits and sales in the quarter.

Capital spending shed 11.3 percent between April and June year-on-year, the biggest drop since the first quarter of 2010, as the COVID-19 crisis hit investments by the manufacturing and service sectors, Finance Ministry data showed Tuesday.

The sharp decline followed a 0.1 percent rise in the first three months of the year, which already signaled strains in corporate sentiment resulting from the coronavirus pandemic.

On a seasonally adjusted basis, capital expenditure lost 6.3 percent quarter-on-quarter in the April-June period.

The negative data will be used to calculate revised second-quarter gross domestic product figures, due Sept. 8, with the initial estimate showing a 27.8 percent decline.

While analysts expect the economy to fare better in the current quarter after the state of emergency was ended in late May, many forecast any rebound to be modest and a recovery to take years.

Japan is also in the midst of a leadership change after Prime Minister Shinzo Abe said Friday he will step down due to worsening of a chronic illness, raising uncertainty about the outlook for monetary and fiscal policy.

The government expects the economy will recover to pre-coronavirus levels around the first quarter of 2022, economic revitalization minister Yasutoshi Nishimura said last week.

The latest Finance Ministry survey showed manufacturers’ business spending fell 9.7 percent from a year earlier, following a 5.3 percent drop in the previous quarter.

Corporate recurring profit tumbled 46.6 percent in the April-June quarter from a year earlier, the biggest drop since the second quarter of 2009, due to declining demand for cars and other transportation goods.

Sales dropped 17.7 percent year-on-year between April and June, down for the fourth straight quarter to see the biggest drop since between January and March in 2009.

Meanwhile, separate government data released Tuesday showed the jobless rate rose while the availability of jobs declined in July.

The seasonally adjusted unemployment rate was 2.9 percent in July, up from 2.8 percent in June, figures from the Internal Affairs and Communications Ministry showed. The median forecast was 3.0 percent.

The jobs-to-applicants ratio slipped for the seventh straight month in July, falling to 1.08 from the previous month’s 1.11 to mark the lowest reading since April 2014, labor ministry data showed. The reading matched the median forecast.

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